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The role of national culture and corruption on managing earnings around the world

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  • Lewellyn, Krista B.
  • Bao, Shuji 'Rosey'

Abstract

Earnings management involves using managerial discretion to distort firm financial performance in order to mislead stakeholders. Drawing from institutional theory, we argue that national culture dimensions of power distance and institutional collectivism, which are related to how individuals view themselves with respect to others, serve as informal institutional forces that influence earnings management. We also propose that corruption, as an informal institution plays a significant role in explaining cross-national variation in earnings management. Using a sample of firms from 26 countries, we find support for both direct and interactive effects of these important informal aspects of the institutional context.

Suggested Citation

  • Lewellyn, Krista B. & Bao, Shuji 'Rosey', 2017. "The role of national culture and corruption on managing earnings around the world," Journal of World Business, Elsevier, vol. 52(6), pages 798-808.
    • Handle: RePEc:eee:worbus:v:52:y:2017:i:6:p:798-808
    DOI: 10.1016/j.jwb.2017.07.002
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    2. Aboul-Dahab, Sameh & Agag, Gomaa & Hassan Abdelmoety, Ziad, 2021. "Examining the influence of cultural and ethical ideology on consumers’ perceptions about the ethics of online retailers and its effects on their loyalty," Journal of Retailing and Consumer Services, Elsevier, vol. 61(C).
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    5. Bahoo, Salman & Alon, Ilan & Paltrinieri, Andrea, 2020. "Corruption in international business: A review and research agenda," International Business Review, Elsevier, vol. 29(4).
    6. Agyenim Boateng & Yan Wang & Collins Ntim & Keith W. Glaister, 2021. "National culture, corporate governance and corruption: A cross‐country analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 3852-3874, July.
    7. Haga, Jesper & Huhtamäki, Fredrik & Sundvik, Dennis, 2022. "Employee effort and earnings management," Global Finance Journal, Elsevier, vol. 53(C).
    8. Muhammad Ansar Majeed & Tanveer Ahsan & Ammar Ali Gull, 2024. "Does corruption sand the wheels of sustainable development? Evidence through green innovation," Business Strategy and the Environment, Wiley Blackwell, vol. 33(5), pages 4626-4651, July.
    9. Aditya Simha & K. Praveen Parboteeah, 2020. "The Big 5 Personality Traits and Willingness to Justify Unethical Behavior—A Cross-National Examination," Journal of Business Ethics, Springer, vol. 167(3), pages 451-471, December.
    10. Neubert, Mitchell J. & de Luque, Mary Sully & Quade, Matthew J. & Hunter, Emily M., 2022. "Servant leadership across the globe: Assessing universal and culturally contingent relevance in organizational contexts," Journal of World Business, Elsevier, vol. 57(2).
    11. Manasi Gokhale & Deepa Pillai, 2024. "Firm level and country level determinants of earnings management in emerging economies: a systematic framework-based review," Future Business Journal, Springer, vol. 10(1), pages 1-16, December.
    12. Cuervo-Cazurra, Alvaro & Dieleman, Marleen & Hirsch, Paul & Rodrigues, Suzana B. & Zyglidopoulos, Stelios, 2021. "Multinationals’ misbehavior," Journal of World Business, Elsevier, vol. 56(5).
    13. Uzuegbunam, Ikenna & Geringer, J. Michael, 2021. "Culture, connectedness, and international adoption of disruptive innovation," Journal of International Management, Elsevier, vol. 27(1).

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